What to Know About the Collections Process with Regard to Your HOA

One issue that commonly plagues homeowner associations
(HOAs) is the ability to make timely collections of HOA fees from members.
There may come a time when a member becomes delinquent on their HOA
assessments, at which point you may be wondering what recourse you have from an
HOA standpoint to collect the money you’re owed.

The most common method of collections in these circumstances
is to use an assessment lien, which allows an HOA to sell off the homeowner’s
property to repay the assessments owed to the association. Under an assessment
lien, a homeowner is also prohibited from refinancing or selling a property
subject to an assessment lien themselves until the lien is fully satisfied.

Here is some information about assessment liens and HOA
collections from an experienced HOA legal counsel in Arizona.

Developing an
assessment lien

Most of the time, an assessment lien is formed automatically
against a homeowner’s property when the homeowner goes past due on payments.
HOAs will typically create a “Notice of Lien” document that goes on public
record with the county recorder’s office. The document describes the property
that is subject to the lien, as well as how much is owed to the HOA.

Just about every single HOA has the power to place such
liens on properties owned by HOA members who have fallen past due on their
assessments. HOAs were granted this power with the adoption of the Arizona
Planned Community Act and the Arizona Condominium Act. The HOA must be
classified as a “planned community” or “condominium” for it to have this power.

So, what exactly makes for a “planned community” or
“condominium” under state law? This primarily depends on ownership of common
areas in the community. In a condo, homeowners have equal ownership stake in
all of the common areas. In planned communities, however, the common areas are
actually owned by the HOA.

While there are some HOAs that might not be categorized
either as condominiums or planned communities, that does not mean they do not
have assessment lien rights. While Arizona state law might not guarantee those
HOAs assessment lien rights, the governing documents (i.e. articles of
incorporation) for that HOA may give it the right to place assessment liens on properties.

Collecting assessment
liens

HOAs are required to file lawsuits and receive favorable
judgments before they can legally foreclose assessment liens. This can be a
very expensive and time-consuming process, so it’s typically a last resort for
HOAs after they have already exercised all other available options.

Assessment liens will be automatically ended if the
collection proceedings are not brought forth within three years. HOAs are still
allowed to sue homeowners for up to six years of unpaid assessments, though, so
it’s important for homeowners to keep that statute of limitations in mind.

For more information about the collections process in a
homeowner association and about assessment liens, contact Goodman Law Group to arrange
a consultation with qualified HOA legal counsel in Arizona. We look forward to assisting
you.

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